March 2008

A summary of articles appearing in the March 2008 issue of Trusts and Estates magazines.


R.E.S.P.E.C.T.— February was Black History month and Swann Auction Galleries celebrated with an African-American Fine Art sale on Feb. 19, 2008, in New York. At that auction, one of Elizabeth Catlett’s most famous images, “Sharecropper,” sold. A color version of the linoleum-cut print (reportedly created in 1957 and printed circa 1970) fetched $18,000; a black and white version went for $7,800.

Catlett was born in Washington in 1915. In 1940, she became the first student to receive an M.F.A. in sculpture at the University of Iowa. She studied ceramics at the Art Institute of Chicago in 1941 and lithography at the Art Students League in New York from 1942 to 1943. In 1947, Catlett married Mexican artist Francisco Mora and made Mexico her permanent home, later becoming a Mexican citizen. She became head of the sculpture department at the National Autonomous University of Mexico, School of Fine Arts, San Carlos, in Mexico City in 1958. She taught there until retiring in 1975. Catlett now lives in Cuernavaca, Mexico.

Also featured in this issue:

• p. 27—Aaron Douglas’s oil on canvas, “Building More Stately Mansions” (1944), set an auction record for the artist when it sold for the auction’s top price of $600,000.

• p. 54—Elizabeth Catlett’s terra cotta sculpture of Joan of Arc, “Torso, Portrait of Joan” (1960), set an artist’s record when it fetched $216,000.

(Cover Image: Courtesy of Swann Auction Galleries)


10/ Tax Law Update

David A. Handler, partner, and Alison E. Lothes, associate, in the Chicago office of Kirkland & Ellis LLP, report on: Offner v. United States and Estate of Farnam v. Commissioner.

11/ Tax Court’s Guide To Charitable Lid Plans

David T. Leibell and Daniel L. Daniels, partners in the Stamford, Conn., office of Wiggin & Dana LLP, report on Estate of Helen of Christiansen v. Comm’r, a case that gives planners a roadmap to establishing an estate plan for a private foundation that contains a charitable lid effectuated by a disclaimer.


Estate Planning& Taxation

16/ The Three Gs
By David L. Weinreb & Warren Litman

Sophisticated quantitative modeling and capital markets forecasting demonstrate that even a client with a very large estate may be able to satisfy all of his wealth- transfer goals using just these straightforward strategies: gifts, grantor-retained annuity trusts (GRATs) and grantor trusts. Indeed, the best results are realized with a combination.

David L. Weinrebis a director and Warren Litman is a senior quantitative analyst in the Wealth Management Group at Bernstein Global Wealth Management in New York.

Fiduciary Professions

23/ The Thrill of Trust Funding
By Mary Lee Moseley & Julie Franck

Too often, practitioners treat subtrust funding as an afterthought of little consequence. Mistake. If properly implemented, subtrust funding can offer some unique tax-planning opportunities. The converse also is true: Done poorly, the consequences can be severe. The authors offer a guide to the opportunities and pitfalls.

Mary Lee Moseley is president and Julie Franckis a director at Schwab Charitable in San Francisco.


29/ A New Split-Dollar Imperative
By Charles L. Ratner, Lawrence Brody & Mary Ann Mancini

Unfortunately, it’s time to look again at those split-dollar arrangements. Yes, we know. Ever since the Internal Revenue Service issued Notice 2001-10, planners who advise clients on their split-dollar life insurance arrangements have had to deal with a Byzantine set of rules that yield different answers. But now, with the passage of Internal Revenue Code Section 409A and the issuance of Notice 2007-34, planners have to deal with a whole new set of additional complications. Here’s what to look for and why.

Charles Ratner is the national director of personal insurance counseling at Ernst & Young LLP in Cleveland and chair of the Trusts & Estates insurance committee. Lawrence Brody is a partner in the St. Louis office, and Mary Ann Mancini is a partner in the Washington office, both with the law firm of Bryan Cave LLP.

37/ Using Variable Annuities in IRAs
By Brandon Buckingham

Increasingly, investors are looking to annuity features designed to help protect retirement assets and facilitate income distributions. But because annuities have historically been sold for their tax-deferral benefits, many question the growing practice of using these investments in tax-deferred accounts such as individual retirement accounts (IRAs). Truth is: there are benefits, potential pitfalls and a slew of retirement and estate-planning issues that need to be considered when using variable annuities in IRAs.

Brandon Buckingham is an advanced planning attorney at John Hancock Financial Services in Boston.


Family Businesses

42/ Peace in the Sandbox
By Charles A. Redd

Succession planning for a closely held business is difficult primarily for two reasons: Equity in a family business is unique in that it often has substantial value but limited marketability; and family relationships are often emotionally charged when dealing with that asset. Indeed, non-tax matters often equal or exceed tax issues in establishing a succession plan. The author offers a guide to how estate planners might effectively handle some of the most difficult issues, including passing a family business on to the children who are active in the firm while properly compensating the children who are not.

Charles A. Redd is a partner at Sonnenchein Nath & Rosenthal LLP in St. Louis.

49/ A Practical Guide To Buy-Sell Agreements
By David T. Leibell & Daniel L. Daniels

Planning for business succession is a growth industry. For family businesses, buy-sell agreements can be an effective means to address succession planning and other issues. But proper structuring and execution is crucial. Here’s how to deploy this powerful tool.

David T. Leibell and Daniel L. Daniels are partners in Wiggin and Dana LLP in Stamford, Conn.


Retirement Planning

59/ Tax Preparation Alert
By Michael J. Jones

For perhaps the first time in tax preparation history, traditional and Roth individual retirement accounts must be screened for “wash sales”—thanks to Revenue Ruling 2008-5. That certainly means more work for practitioners. Meanwhile, IRA owners may be shocked to discover that anything occurring inside a traditional or Roth IRA can increase their income taxes. But that’s precisely what will happen if a deduction arising from a loss sale is disallowed under the new ruling. Author Michael J. Jones argues that the the Internal Revenue Service made a mistake and should scrub this revenue ruling.

Michael J. Jones is a partner at Thompson Jones LLP of Monterey, Calif. He is also the chair of the Trusts & Estates retirement benefits committee.

Estate Planning & Taxation

62/ Knight’s Decided. Now What?
By Kevin Matz

When the U.S. Supreme Court reached its unanimous decision in Knight v. Commissioner, on Jan. 16, 2008, we thought we knew what we needed to know about investment advisory fees, but many questions remain unanswered. Some implications to consider.

Kevin Matz, a lawyer and accountant, is an associate in the Private Clients Group of White & Case LLP, in its New York City office.

TAGS: Research
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